“We are supervised by the ECB and the Bank of Italy and have very close ties. Obviously when the loopholes get tighter one gets some fatigue reactions because the objectives need to be achieved but the crises abroad and in Switzerland proved the ECB and the Bank of Italy right and highlighted the efforts of the Italian banking system that it was not shaken”. This was stated by the president of ABI, Antonio Patuelli, who took part in the Festival of Economy on June 4 in Turin.
Positive bank balances are not dependent on interest rates
Then, regarding interest rates and the Italian banking system, Patuelli warned: “Don’t make the mistake of thinking that the banks’ final balances for 2022, for those who have achieved positive or very positive results, depend mainly or exclusively on the took place from July would make a strong conceptual error “. Because “those results were already highlighted ‘in a nutshell’ in the half-yearly reports of 2022 because in the first months of 2022 the banks did not do very badly and it is not the case that they did very well just because the interest rate trend changed from the second half of July it would be an unjust, incurable, incomplete and very biased picture.” A fair judgment recognizes that in recent years “there have been very strong bank capitalization operations with massive capital increases, secondly, very strong provisioning and third, but not least, very strong bank restructurings, some even with notable early retirements, with even painful branch closures that tend to drive down costs,” he said again. For companies, however, it’s different: “They used to save and are now paying more. They’ve seen the costs associated with higher rates are not planned and there is a risk of new business crises with credit deterioration,” explains Patuelli, underlining the need to avoid increases by setting aside profits.
Too high rates pose a risk to entrepreneurs
“Companies have not made long-term plans with cost projections that are adequate for liquidity. There is a danger that if interest rates remain at this level or even higher for a long period of time, this could lead to corporate crises and the deterioration of non-negligible parts of bank credit,” said ABI’s president. “Many businesses and many citizens are accustomed to zero rates, which have been at zero for six years and zero in the other four, and have had the estimates of the cost of mortgages and loans taken out at floating rates in the zero years,” explained Patuelli. “It is true that 63%, given by Bankitalia, of mortgages in Italy have a fixed interest rate and therefore the increase in interest rates is a cost for the banks and not for the customers, but 37% of the companies that go to the variable have gone that they have saved in previous years, one or ten or twenty, but they are now paying more and if they have not programmed these costs, they risk getting into trouble”. For this reason, “we have the prospect of new corporate crises and when there are corporate crises, there are credit deteriorations and we banks need to counter the credit deterioration, but also avoid its consequences by setting aside more profits”.
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I am Lawrence Sickels and I work in the news industry. For the past few years, I have been writing for The News Dept, a web-based platform dedicated to providing readers with quality journalism. My main area of focus is covering economic news and business trends across the globe. With my detailed knowledge of current affairs and market analysis, I am able to offer insightful commentary on economic issues beyond the headlines.
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